Cargo Carriers Monetize Mail

The UPS deal is also notable because it signals an end to the historically chilly relations the company has had with the Postal Service. "Mike Eskew made it clear when he became chairman [of UPS] in 2002 that we wanted to establish a much more positive relationship with the USPS," Sternad said. "You are seeing the result."

The Air Mail Act of 1925 authorized the Postal Service to contract for domestic airmail service with carriers, effectively creating the commercial aviation industry. Early bidders included Henry Ford's Ford Air Transport, what was then the Boeing Airplane Co., and Varney Airlines, a United forerunner.

Carriers like Pan American World Airways and US Airways(LCC Quote - Cramer on LCC - Stock Picks) originated as mail carriers. The relationship between the Postal Service and the industry was so cozy that Capital Airlines once had a contract requiring it to pay the post office when it became profitable. Washington-based Capital, once the fifth-largest domestic carrier, merged into United in 1961.

"There was a time when Capital Airlines paid the post office for the privilege of carrying the mail," recalled retired industry veteran Mort Beyer, a former junior executive at the company. "For years they had paid us, and they were responsible for the survival of the airline. Then we turned the company around in the early 1950s, and we started to pay them. That's what the contract specified. That's the way it worked in those days."

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